Mortgage approvals for home purchases in April were nearly 40 per cent lower year-on-year, despite rising slightly from a record low in March, new figures show.

Some 38,704 home loans for house purchase were approved last month, up from 35,546 in March, but this is down on the six-month average of 41,955, data from the British Bankers' Association (BBA) shows.

Mortgage lenders are still tightening their lending criteria and increasing their rates in the wake of the credit crunch to limit the number of mortgage applications they receive, making it increasingly difficult for borrowers, especially first-time buyers, to obtain a home loan.

Approvals for March were the lowest since the series began in September 1997.

Economists say that this gloomy mortgage data will continue to exert downward pressure on house prices.

Howard Archer, of Global Insight, the economic consultancy, said: "Despite April's modest rise in mortgage approvals, the BBA data are still very weak and indicate that house buying remains under severe pressure from the damaging combination of stretched affordability and tight lending conditions.

"Ongoing low housing market activity seems certain to feed through to further depress house prices."

However, approvals for remortgages rose to 74,722, up from 60,410, as increasing numbers of people reached the end of their fixed-term deals. Around 1.5 million people are set to come to the end of short-term mortgage deals this year.

The BBA figures represent lending from the UK's banks, which accounts for around two thirds of the UK's mortgage lending.

There was additional evidence that consumers are tightening their belts as the credit crunch continues to bite. Borrowing on credit cards fell by £0.1 billion in April, after a £0.6 billion rise in March. There was also a £5.8 billion leap in savings deposits after a rise of £2.8 billion in March.

Consumer services firms such as hotels, bars and restaurants, cinemas, leisure clubs and personal care services, are also reporting a fall in their business, a CBI survey shows. A balance of 44 per cent of consumer services firms reported that their volume of business fell over the past three months, while a balance of 33 per cent said that their value of business was down - the lowest balances since November 2001.

Mr Archer said: "The data suggest that many consumers either had little money to spare to spend on eating out, entertainment and pampering themselves after they had paid for their more expensive essentials such as food, utility bills and petrol, or were looking to cut back on the luxuries and improve their personal finances in the face of the deteriorating economic outlook."

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